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Principles of Accounting and Finance Assignment

   

Added on  2020-04-07

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Principles of accounting and finance

Table of ContentsEXCUTIVE SUMMARY................................................................................................................1BACKGROUND AND COMPANY OVERVIEW........................................................................1ANALYSIS......................................................................................................................................3Profitability..................................................................................................................................3Efficiency.....................................................................................................................................4Liquidity......................................................................................................................................5Gearing (Leverage)......................................................................................................................6Investment Ratios........................................................................................................................6CONCLUSION AND FINDINGS..................................................................................................7RECOMMENDATIONS.................................................................................................................8APPENDIX......................................................................................................................................8REFERENCES..............................................................................................................................10

EXCUTIVE SUMMARYThe financial analysis allows organization in knowing its present performance in themarket. The present report carried out is based on Billabong International Ltd where theorganization is indulged in the practice of wholesaling and retailing of surf, stake snow, sportsapparel, etc. The products of the company are licensed in more than 100 countries, and itsservices are rendered at approximately 10,000 locations worldwide[ CITATION Bil16 \l 1033 ].Ratio analysis of the company has been carried out where profitability, efficiency, liquidity,gearing and investing ratios have been computed. Calculation of profitability ratios hassupported in knowing that company is not able to earn adequate profits by carrying out its overalloperations in the market. Apart from this, analysis of efficiency ratios of Billabong International has shown thatbusiness is not at all efficient. Cash conversion cycle of the company is high and along with thisinventory turnover ratio is also high. Leverage ratio has shown unfavorable results where thecompany has the high dependency on debt as compared with the equity[ CITATION Bod13 \l1033 ]. Therefore, the overall findings are that financial performance of Billabong Internationalrequires improvement and is not up to the mark. It is recommended to business to indulge in thepractice of financial planning, and it is required for the business to focus more on retainedearnings rather than focusing on the external source of finance.BACKGROUND AND COMPANY OVERVIEWFinancial analysis plays most important role in the organization as it allows in knowingwhether the business is performing efficiently or not. Further, in the modern era the marketwhere organizations operate is highly competitive and due to this reason every organization isinterested in knowing its financial performance and in turn corrective actions are applied forperformance enhancement[ CITATION Bab13 \l 1033 ]. The present report carried out is basedon Billabong International Ltd where the organization is indulged in the practice of wholesalingand retailing of surf, stake snow, sports apparel, etc. The firm was founded in the year 1973 andis headquartered in Queensland, Australia. The organization is engaged in the practice of marketing, distribution, wholesale ofdifferent type of retail commodities as per the need and requirement of the targetmarket[ CITATION Bil17 \l 1033 ]. The present study has been carried out with the motive toknow the financial performance of Billabong International Ltd where ratio analysis has been1

carried out of 2016 and 2015 to know how to present performance of the entity has beenenhanced as compared with the past. Ratio analysis of the company has been carried out whereprofitability, efficiency, liquidity, gearing and investing ratios has been computed. Calculatingall these ratios is considered to be most significant for the business as it allows business inknowing its efficiency. The products of the company are licensed in more than 100 countries, and its services arerendered at approximately 10,000 locations worldwide[ CITATION Blo17 \l 1033 ]. The rangeof techniques adopted for distribution purpose involves specialized broad sports retailers alongwith the firm’s own branded retailer outlet. The main criteria undertaken by business to boost itsoverall performance is operating with the help of its own store that enhances sales volume alongwith the profitability of the company in every possible manner. In order to know the financialperformance of the entity, its annual report has been accessed through which profitability andsales related information has been accessed by the business. Profitability ratios have been calculated that involves net profit, gross profit, etc. throughwhich it is possible to know whether the present profitability level of the enterprise has beenincreased or not as compared with the past. Apart from this, liquidity ratios have been computedin order to know whether cash position of the enterprise is strong or not. Billabong hires approx4000 staff members worldwide with the motive to meet with the expectations of the targetmarket[ CITATION Reu17 \l 1033 ]. A major part of the revenue earned by the company is fromwholly owned operations carried out in the market of Australia, North America, Europe, Japan,New Zealand, South Africa and Brazil. These are the most significant markets through whichenterprise is earning revenue and has allowed recovering the major costs. The company is publicly listed on the Australian Securities Exchange. Apart from this,the market where Billabong operates is highly competitive, and in turn, many players areoperating in the market. Due to this basic reason financial analysis has to be carried out by thebusiness. By comparing the present profitability position of the business and its comparison withthe past can surely provide long-term benefits to the business[ CITATION Ter14 \l 1033 ]. Thisis the main reason due to which comparative analysis of Billabong has been carried out throughratio analysis. Apart from this, recommendations have been provided to the business on the basisof the present performance so that more effective strategies can be developed for the future andthis can allow in operating efficiently. Ratio analysis is considered to be one of the most2

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